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Crude, but Effective

VIX came within a point of completing its Inverse H&S pattern this morning but was beat back by the equities stick save. The purple channel we drew a couple of weeks ago was broken, but there is one last viable channel (yellow) that can be drawn — based on this morning’s high. Anything beyond will have to be viewed as a break out.

Based on the RSI channels we’ve been watching for the past few months, I suspect it will have to rebuild some momentum before the next push higher.

This morning’s pull back might also help establish a 2nd IHS pattern (in yellow.)

Note that this morning’s high was a .786 retracement of the Apr 10 – Apr 26 plunge. I’ll put a yellow B on it, and see if in the establishment of a new IHS right shoulder we also mark a Point C for a Butterfly pattern that takes VIX up to a 1.272/1.618 extension.

The 1.618 at 24.34 happens to coincide with the 1.272 of the larger purple pattern. I have it currently drawn as a Bat, but it’s angling to become a Crab. The current purple D (at the .886) is slated to be replaced with a B, meaning the ultimate target is a 1.618 extension at 27.12.

Despite the ambiguous daily chart, the 60-min shows a potential break out for VIX is at hand. Using the same RSI channel methodology, it appears as though the VIX pullback is a backtest of the recently departed channel and the next move is up (down for equities.)

ORIGINAL POST:

I checked mobile CNBC when I woke up this morning and saw the BREAKING NEWS!!! that Warren Buffet was buying more of two of the stocks he already owns. I knew before even checking that the stick save was in.

March German factory orders were reported up by 2.2% vs 0.5% expectations. Beyond the headlines, though, orders within the EZ were flat, while exports outside the EZ were up 4.8%. It’s amazing what you can do with a 1.30 euro.

The big question is whether the stick save will…well, stick. Without rehashing the obvious, the euro zone mess just got a lot messier this weekend. No wonder that the euro itself is having conniption fits.

The dip below 1.30 was widely reported, as was the subsequent recovery. What’s missing from the headlines all together is the fact that the recovery is nothing more than a back test of the broken H&S neckline.

I realize that calling this a H&S pattern is a stretch, as the right shoulder is much bigger than the left and we had the failure to play out on Mar 16. But, so far, it’s behaved like one, so we’ll go with that loose characterization.

Overnight, EURUSD tagged the .618 of the Jan-Feb rise — which doesn’t really clarify the harmonic situation. But, I think it’s fair to say the Bat/Crab which completes at 1.2721 is very much in play and, in fact, strengthened.

I suspect the ECB is LTROing like crazy at the moment — the only thing keeping the euro afloat. When it falters, it’ll be very tough to keep the game going. Greece is again the most immediate problem. Given the absence of a coalition government, it’s particularly alarming that eur 430 million in debt matures on the 15th — eur 430 million that the government simply doesn’t have.

The SPX has scarcely missed a beat this morning — bottoming at 1363.94 shortly after the opening. Interesting that the low lines up nicely with two previous intra-day tags on Apr 23 and Mar 6 (yellow, dashed TL.)

The potential to bounce off this TL can be seen in the 60-min chart. We’re essentially stuck at the .886 (Bat pattern), and have traced out a striking channel in RSI.The bearish case would be greatly aided by move below the previous low of 1358 and/or a close below 1363.